Philips 2005 Annual Report Download - page 63

Philips Annual Report 2005 63
relatestotheachievementsoftheprecedingnancialyear
in relation to agreed targets. As a result, Annual Incentives
paid in 2005 relate to the salary levels and the performance
in the year 2004. Similarly, the Annual Incentive payable in
2006 will be calculated on the basis of the 2005 annual results.
The 2004 results led to an Annual Incentive pay-out in
2005basedonthedegreeofachievementofthenancial
target and team targets for 2004. The Annual Incentive
pay-out in 2005 and for the previous two years is shown
in the next table.
in euros pay-out in 2005
members Board of Management1)
realized
annual
incentive
as a % of
base salary
(2004)
G.J. Kleisterlee 1,028,160 100.8%
P-J. Sivignon - -2)
G.H.A. Dutiné 509,040 100.8%
A. Huijser 554,400 100.8%
1) Reference date for Board membership is December 31, 2005
2) No pay-out in 2005 since Mr Sivignon �oined Philips on June 15, 2005
in euros pay-out in 2004
members Board of Management1)
realized
annual
incentive
as a % of
base salary
(2003)
G.J. Kleisterlee 867,600 86.8%
G.H.A. Dutiné 438,138 86.8%
A. Huijser 433,800 86.8%
1) Reference date for Board membership is December 31, 2005
in euros pay-out in 2003
members Board of Management1)
realized
annual
incentive
as a % of
base salary
(2002)
G.J. Kleisterlee 229,640 27.8%
G.H.A. Dutiné 158,0002) 42.1%
A. Huijser 93,9442) 27.8%
1) Reference date for Board membership is December 31, 2005
2) Related to period April-December 2002
The differences in pay-out are related to the level of
performance in each year.
Long-Term Incentive Plan
For many years Philips has operated a Long-Term Incentive
Plan (LTIP), which has served to align the interests of the
participating employees with the shareholders’ interests
and to attract, motivate and retain participating employees.
Until 2002 the long-term incentive awards consisted
exclusively of stock options, but since 2003 an LTIP
approved by the General Meeting of Shareholders has
been in place consisting of a mix of restricted share rights
and stock options.
For grantees, this LTIP results in less volatility in their
income. For the Company the plan reduces the impact of
future share overhang, because restricted share rights will
partly replace the original number of stock options in each
grant (one restricted share right for three stock options).
By granting additional (premium) shares after the grantees
have held the restricted shares for three years after delivery,
provided they are still in service, grantees will be more
stimulated to focus on the longer term as shareholders
of the Company.
The actual number of long-term incentives that will be
granted to the members of the Board of Management, the
other members of the Group Management Committee,
executives and other key employees depends on the team
and/or individual performance of the team/individual and
on the share performance of Philips.
The share performance of Philips is measured on the basis
of the Philips Total Shareholder Return (TSR) compared
to the TSR of a peer group of leading multinational
electronics/electrical equipment companies over a three-
year period*). The TSR performance of Philips and the
companies in the peer group is divided into quintiles.
Based on this relative TSR position at the end of December,
the Supervisory Board establishes a multiplier which varies
from 0.8 – 1.2 and depends on the quintile in which the
Philips TSR results fall. For 2005 the Supervisory Board
has applied a multiplier of 1.0, based on the Philips share
performance over the period from the last working day
in December 2001 to December 31, 2004.
Based on this calculation method, the 2003 General
Meeting of Shareholders approved a pool of 12 million
stock options and 4 million restricted share rights (based
on a multiplier of 1.1 but excluding premium shares). Every
individual grant, the size of which depends on the positions
*) Electrolux, Emerson Electric, Ericsson, General Electric, Gillette,
Hitachi, IBM, Intel, LG Electronics, Lucent, Marconi, Matsushita,
Motorola, NEC, Nokia, Philips, Samsung, Sanyo Electric, Sharp,
Siemens, Sony, Texas Instruments, Tyco International, Whirlpool